prpri New Cheque Bounce Provisions give MSME’s more power in Cheque Bounce Cases New Cheque Bounce Provisions give MSME’s more power in Cheque Bounce Cases

Negotiable Instruments Act, 1881 provides for an early mode for redressal where a cheque, for discharge of debt or liability, is dishonored due to paucity of funds or where it exceeds arrangement. Section 138 mandates that “such person shall be deemed to have committed an offence and shall, without prejudice to the other provisions of this Act, be punished with imprisonment for a term which may extend to two years, or with a fine which may extend to twice the amount of the cheque, or with both.” This section applies when the cheque is presented within 3 months from the date on which it is drawn & notice is given within 30 days of the receipt of information of return of cheque by the bank & the drawer does not make payment within 15 days of the receipt of such notice. Section 143 of the Negotiable Instruments Act mandates that the trial of the cases should be continued day to day and should be concluded within 6 months from the date of filing of the complaint. However, as per the 213th report of Law Commission, almost 20 percent of the pending litigation relate to cheque dishonor disputes u/s 138 of the NI Act.

An Amendment Act was brought by the Government to meet reducing the undue delay in the cases of dishonor of cheques and to provide payment of interim compensation to the complainants. The MSME’s in particular have been representing that due to delay tactics, easy filing of appeals and obtaining stay on proceedings, the very purpose of section 138 of the NI Act was being frustrated.

2 new Sections have been inserted in the NI Act namely Section 143A & Section 148 to provide interim compensation to the complainant. During trial by the Court u/s 138 of the NI Act, interim compensation not exceeding 20% shall be awarded which shall be payable within 60 days of the order by the drawer of the cheque to the complainant. In the event of the drawer of the cheque being acquitted, the complainant shall be liable to refund the interim compensation within 60 days of the order with bank interest, as published by Reserve Bank of India, to the drawer of the cheque.

Newly inserted Section 148 grants power to the Appellate court to order payment pending appeal against conviction. The court may order the appellant to deposit minimum of 20% of the fine or compensation awarded by the trial court. The court may direct the amount deposited to the paid to the complainant during the pendency of appeal. However, in case of acquittal, the complainant shall have to refund this amount along with bank interest as published by Reserve Bank of India.

These changes in Law means MSME’s have greater power in cheque dishonor cases. The drawer can impress upon the court for speedy trial and also for grant of interim compensation of 20 percent as a partial recovery. A salient feature of the interim compensation awarded u/s 143A & 148 of the NI Act is that it can be recovered as a fine u/s 421 of CPC, 1973 which implies that the court can attach and sale any immovable properly of the drawer or issue a warrant to be district collector to realize this amount as land revenue from be drawer / defaulter. All these amendments shall be applicable to the cases where defaults have been committed on or after 1st September 2018.

It is an indeed a welcome change for the much stressed MSME sector facing the problem of cash liquidity and also chain of incalculable losses forced  upon them due to dishonor of cheques. It is the need of the day to publicize these amendments for the benefit of the MSME’s & the traders.



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July 2021